OPEC nation, Venezuela, increases its borrowing limit from China, but draws fear over its long-term debt burden.
China has now become the single largest foreign source of financing for the South American nation, which is borrowing heavily to develop social welfare and infrastructure projects. In 2008, the Venezuelan government set a $4 billion cap on any given loan from the China Development Bank, a figure which has now been revised up to $8 billion. The funding will be used to help sustain its positive economic growth, which reached 5.5% growth last year.
The financing includes three $4 billion loans in addition to a separate $20 billion loan received in 2010. The state also sold $17 billion in PDVSA bonds last year, even as oil revenues continued to surge.
While many support Venezuelan President Chavez’s self-styled “revolution”, the latest loan arrangements have attracted criticism from the opposition, who believe the short-term gains may compromise the nation’s future by burdening it with debt. Opposition member Americo De Grazia claims the loans have “taken [Venezuela] back to the colonial era” as the state sells off its energy resources for quick cash. Venezuelan debt issues have now reached $79.9 billion, casting doubts about the future of the 29 million person-strong nation.